Which mortgage payment strategy is likely to result in the greatest interest savings for a client?

Which mortgage payment strategy is likely to result in the greatest interest savings for a client?

• A. Changing from monthly to bi-weekly mortgage payments.
• B. Changing from monthly to weekly mortgage payments.
• C. Reducing the amortization period from 25 years to 15 years.
• D. Making an extra monthly mortgage payment at the beginning of each year.

Answer: (C)

The strategy of reducing the amortization period from 25 years to 15 years is likely to result in the greatest interest savings for a client because it significantly decreases the total amount of interest paid over the life of the loan. By shortening the loan term, the borrower pays off the principal more quickly, which means that interest is calculated on a smaller remaining balance over a shorter timeframe. In addition to paying less interest overall, the borrower will also build equity in their home much faster, which can be a strategic financial benefit. This shorter amortization period typically comes with a lower interest rate as well, further enhancing potential savings compared to longer terms. Other strategies, while beneficial in their own ways, generally provide less dramatic interest savings. For instance, changing from monthly to bi-weekly or weekly payments helps pay off the mortgage faster compared to monthly payments, but the impact is less substantial than reducing the overall length of the loan. Similarly, making an extra monthly payment once a year can reduce the principal, but the extent of interest savings will be relatively minor compared to switching to a 15-year term. Thus, focusing on the key strategy of reducing the amortization period effectively maximizes interest savings, primarily due to the reduced time during which interest accr

The strategy of reducing the amortization period from 25 years to 15 years is likely to result in the greatest interest savings for a client because it significantly decreases the total amount of interest paid over the life of the loan. By shortening the loan term, the borrower pays off the principal more quickly, which means that interest is calculated on a smaller remaining balance over a shorter timeframe.

In addition to paying less interest overall, the borrower will also build equity in their home much faster, which can be a strategic financial benefit. This shorter amortization period typically comes with a lower interest rate as well, further enhancing potential savings compared to longer terms.

Other strategies, while beneficial in their own ways, generally provide less dramatic interest savings. For instance, changing from monthly to bi-weekly or weekly payments helps pay off the mortgage faster compared to monthly payments, but the impact is less substantial than reducing the overall length of the loan. Similarly, making an extra monthly payment once a year can reduce the principal, but the extent of interest savings will be relatively minor compared to switching to a 15-year term.

Thus, focusing on the key strategy of reducing the amortization period effectively maximizes interest savings, primarily due to the reduced time during which interest accr